"A total of USD9.1 billion was issued in Q3, raising issuance through end-September to USD30.7 billion, a record high level for the first nine months of the year," says Annalisa DiChiara, a Moody's Vice President and Senior Credit Officer.
"Investor tolerance for low credit quality and issuers' refinancing needs continued to drive issuance in the Asian high-yield market," says DiChiara.
"Although the number of B3 rated companies and below fell to 15.4% at 30 September 2017 from 17.8% at 30 June, as the number of corporate family ratings (CFRs) climbed to 143 from 129 in this period, with a majority of new ratings assigned CFRs at B1 or below," says DiChiara.
The report says that refinancing risks remain manageable as, absent any exogenous shocks, the market has the capacity to absorb upcoming maturities.
A total of USD5.6 billion of rated bonds will mature by 30 September 2018 and USD123.2 billion of rated and unrated bonds will mature through to 2021.
A total of 10 issuers accounted for 38% of the USD77.2 billion of rated debt outstanding at 30 September 2017.
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Moreover, Moody's Credit Transition Model (CTM) forecasts that the trailing 12-month high-yield non-financial corporate default rate for Asia in 2017 will remain low at 2.9%.
The default rate was 1.5% at end-June 2017, lower than 4.9% at end-June 2016, and was in line with the default trend in global and US portfolios.
Pressure on metals and mining issuers is easing, while technology issuers face relatively higher default risk.
While the Asian Liquidity Stress Indicator (ALSI) increased to 27.3% at 30 September 2017 from 25.6% at 30 June, the rise reflected both newly rated corporates looking to refinance upcoming maturities and the increasing refinancing risks of some existing issuers.
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